A bust-out scheme is a form of first party fraud in which the fraudster applies for credit (credit cards, retail cards, home equity), under their name or using a synthetic identity. The individual builds a good credit history through timely payments, obtaining credit line increases, and increasing utilization. The fraudster then maxes out all available lines of credit, with the intention of not repaying, and drops the account. These changes then go into collections and turn into charge-offs for organizations.
How can you detect and prevent bust-out fraud?
When it comes to bust-out fraud, early detection and proactive monitoring are the best ways to protect your organization’s reputation, resources, and revenue. Spend less time on tedious and manual account reviews by leveraging automated decisioning processes and quickly clearing low-risk customers. Many credit issuers leverage payment, transaction, and call center data to help them predict bust-outs, however these solutions alone may not be enough.
By adding the credit-data based BustOut score to your account review or new account opening processes you can enhance the effectiveness of your bust-out detection program by gaining a complete view of your customer’s credit activity. Taking early action on high risk accounts and detecting them 3 months prior has led to outstanding balances that are 40 percent lower, and 20 percent lower if detected 2 months prior to the bust out.